T-Mobile US Inc, the No. 4 U.S. mobile provider, reported much better-than-expected subscriber growth, outpacing bigger rival AT&T and also putting pressure on other competitors, including market leader Verizon Wireless.

This was the second straight quarter of growth after four years of customer losses at T-Mobile US (Bellevue, WA, USA), which is 74 percent owned by Deutsche Telekom AG (Bonn, Germany). It made inroads against bigger rivals by criticizing them in its marketing and selling itself as more consumer-friendly with cheaper prices and more flexibility.

On top of getting rid of service contracts and offering early phone upgrades, T-Mobile this month launched cheaper international call rates and service fees for tablet computers, potentially boosting current-quarter growth.

T-Mobile increased its customer growth target for the full year and said it added 648,000 net subscribers in the quarter, compared with the average expectation for 444,000 subscribers, according to seven analysts contacted by Reuters.

Excluding connections to devices such as tablet computers, T-Mobile's phone customer growth of 643,000 beat Verizon Wireless's 481,000. Without tablets, AT&T would have reported subscriber losses in the quarter, according to analysts.

"Momentum continues, and we're working diligently to ensure it doesn't stop," Chief Executive John Legere told analysts on a conference call.

T-Mobile's shares fell 1 percent to $28.07 despite the strong growth. New Street Research analyst Jonathan Chaplin said it was due to profit-taking by short-term investors. Shares have risen 22 percent since the end of August.

"It's overall a good quarter," said Hudson Square analyst Todd Rethemeier. "Customer growth was much better than expected, which usually results in lower profitability but in this case they made up for it elsewhere and total profitability was roughly in line with my estimate."

Rethemeier said T-Mobile's adjusted earnings before interest, taxes, depreciation and amortization of $1.34 billion was not far behind his estimate of $1.36 billion, likely because of savings from its merger with MetroPCS.

Bernstein analyst Robin Bienenstock said despite the pressure from T-Mobile, Verizon Wireless and AT&T would likely be reluctant to cut prices and risk a price war because of issues such as dividend payment commitments.

However, CEO Legere vowed to keep pressuring his biggest rivals, particularly in the area of family plans. Many customers are hesitant to switch carriers because it involves moving the entire family. Some investors have said T-Mobile will need to attract entire families to keep growing.

But Legere said a significant number of T-Mobile sales currently are to families. "At some point the fantastic question will be how are they (AT&T and Verizon) going to keep their family plans together," he said.

AVG REVENUE PER USER SLUMPS

One wrinkle in the quarter was a massive decline in average monthly revenue per user (ARPU) to $52.20 from $56.59 a year ago due to the revamping of its service plans and how it accounts for them.

But Chief Financial Officer Braxton Carter told Reuters the decline would stop around the middle of 2014, to be shortly followed by a rise in the measure due to increasing demand for data services among consumers.

After two quarters of beating expectations, T-Mobile was able to increase its customer growth target for 2013 to a range of 1.6 million to 1.8 million from its previous target range of 1 million to 1.2 million.

Some analysts were concerned the target suggested subscriber growth could slow in the fourth quarter, which is traditionally the busiest because of holiday shopping.

Carter said he hoped to be able to beat the target but was being conservative because of possible tough competition in the fourth quarter. Chief Marketing Officer Mike Sievert said in the past, customer departures, also known as churn, has tended to increase at this time of year.

Carter told analysts the company would register with U.S. regulators for permission to raise money through issuing new equity or debt in case it wants to do so in the future.

"If we tap these markets, the focus would be on building a war chest for opportunistic spectrum acquisitions," Carter told Reuters in an interview.

He said T-Mobile would be careful to avoid significant dilution of current share valuations in an equity offering and could take advantage of low interest rates in a debt offering as long as it is able to keep its ratio of debt-to-earnings before interest, taxes, depreciation and amortization of between three and four. Its current ratio is slightly under three.

T-Mobile's net loss narrowed to $36 million in the third quarter from $7.74 billion in the year-ago period, when it incurred a massive goodwill impairment charge of $8.1 billion.

Total revenue jumped to $6.69 billion from $4.89 billion, primarily due to the MetroPCS merger earlier this year.